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Morning Brief: Stanley Druckenmiller’s Currency Misery

The hedge fund legend told CNBC that he is on track to post his first-ever losing year in currencies and that he is up this year purely due to gains in his stock portfolio.

Former hedge fund manager Stanley Druckenmiller is having his first down year trading currencies, he told CNBC.

The legendary Druckenmiller, who worked for George Soros’s Quantum Fund before opening his Duquesne Capital Management hedge fund firm — which he shuttered in 2010 — told CNBC, “It’s the worst year I’ve had relative to the set of opportunities.” He admitted that “1997 was close.”

In a rare admission from the trading maestro, Druckenmiller said in an interview broadcast on Tuesday that he had “mistraded macro” but had “done very well in stocks.”

“If it was up to macro, I’d have my first down year,” he said, noting that his expertise has always been trading currencies. “Barring miracles, this will be my first down year in currencies, ever.”

Druckenmiller, who now runs a family office, is in the black this year thanks to gains in his equity portfolio — but, he said, “I’m not up double digits.”

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John Burbank, whose Passport Capital rose to fame shorting the subprime housing bubble, will close his firm’s troubled flagship fund at yearend, he told investors this week.

“We have decided to close the Passport Global Fund at the end of this year,” he wrote in a letter to investors dated December 11. “Despite a track record since inception that I am very proud of, the returns over the past two years are unacceptable and cause me to rethink how to manage money in this environment.”

Burbank, who had been so bullish on gold following the global financial crisis of 2008 that he claimed to be buying gold bullion and miners, is now keen on bitcoin. The San Francisco hedge fund manager is investing in cryptocurrencies and may start a separate fund for that play, according to individuals familiar with the matter.

As Alpha reported on November 16, Passport Global was continuing to suffer redemptions, including $67 million in the third quarter. At that time, it was was down 12 percent for the year, including a big loss on some emerging market short bets, which left it with $185 million in assets. Firmwide assets were $835 million, down from a peak of more than $4 billion.

Burbank’s decision to shut down Passport Global was first reported by the Wall Street Journal.

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Fusion GPS, the Washington, D.C., investigative firm thrust into the spotlight by producing what’s become known as the “Trump dossier” regarding the president’s alleged activities in Russia, also worked for Herbalife to try to uncover dirt on Bill Ackman, the Pershing Square Capital Management CEO who shorted the multilevel marketing company, the Washington Post reported.

Fusion’s contractors were looking for information that would lead to government investigations into Ackman, documents the Post obtained show. Richard Hynes, a contractor for Fusion, noted that previous regulatory investigations of Ackman — which occurred during the beginning of his battle against municipal bond insurer MBIA — went nowhere and wondered, “What else could we provide them this time to effect a different outcome,” the emails showed, according to the Post.

But Herbalife, not Ackman, was investigated by the Federal Trade Commission, which reached a $200 million settlement in 2016 with the company. Herbalife is still under investigation by the SEC and the Department of Justice, according to its securities filings.

Herbalife and Pershing Square did not return requests for comment.

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Hedge funds are on pace to have their best year since 2013, according to new research from industry data provider eVestment. Hedge funds are now up 7.7 percent year-to-date through November, with an average return of 0.47 percent that month, the report said. Some 80 percent of hedge funds are in positive territory, its November report added.

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